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Asia Pacific insurance survey 2011

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Introduction

A sample of 92 professionals from the insurance sector across Asia Pacific responded to our survey, providing an authoritative and wide-ranging examination of the current state of the insurance market in the region.

The findings of this survey have been grouped into six main themes that touch on some of the primary opportunities and challenges facing insurance companies based in, or with operations in, the region. Those themes are growth, regulation, Solvency II, risk management, capital and claims.

Overall the results present a contrasting picture reflecting the diversity of the region and the relative immaturity of the market. There are tensions between: national protection evidenced by foreign investment restrictions and the opportunities and need for growth; the need to keep regulation light to facilitate growth, yet tight to protect the market and to keep pace with Europe and the rest of the world so as to discourage regulatory arbitrage, and between increasing competition and the higher costs and regulatory burden of Solvency II for European head quartered insurance groups and that local players without those constraints are trying to grow market share ahead of profitability and can pay higher prices on acquisitions.

Key findings

Growth

80 per cent say that Indonesia, Vietnam and Malaysia have significant or very significant growth prospects in the insurance sector over the next two years, trailing only China and India. The common characteristics of these five countries are high population, a relatively immature market and high barriers to entry presented by the insurance regulatory regime and foreign investment (FI) restrictions.

Regulation

61 per cent say that over-regulation is a problem in their jurisdiction. However 80 per cent think that a regime akin to Solvency II is desirable in Asia Pacific. The paradox between the perception that there is sufficient regulation and the view that a Solvency II type regime is necessary, is unresolved. Alignment of regulation within the Asia Pacific region would remove arbitrage between countries and facilitate growth because of the certainty that it would bring. Harmonisation with Western markets is, however, a long way off.

Risk management

75 per cent think that regulatory compliance has been given greater prominence in respondents’ organisations’ operations in the region over the last 12 months.

Capital

51 per cent say expansion is the main strategic objective that will require more capital over the next two years and 33 per cent expect that regulation will trigger more capital.

Claims

47 per cent foresee an increase in claims activity over the next 12 months and 32 per cent expect a corresponding increase in claims disputes.